The purpose of life insurance is to take care of your desired beneficiaries when you pass on. Many people spend much time deciding on the type of insurance and pay the premium for years, yet do not periodically check their beneficiary designations. Whether due to death or divorce, the person or persons you designated as the beneficiary might not be around any longer, or you might need to change the beneficiary for various reasons. The owner has complete control over the naming of beneficiaries, and can change the beneficiary up until the time of the death of the insured. The beneficiary can be one or more individuals or an entity such as a church or charity. Minors should generally not be named as beneficiaries, as the courts would have to name a guardian to administer the funds on behalf of the minor. Contingent beneficiaries are secondary beneficiaries that can be named. They get no benefit unless the primary beneficiary has already passed away. In general, you do not want to name your “estate” as beneficiary. Life insurance is designed to bypass probate, but if you name your estate as beneficiary, proceeds paid will be subject to the expense and time delays of the probate process. The bottom line is that every few years or after “life changing events”, you need to check your beneficiaries to make certain they are the ones you want to inherit your wealth.
Don’t make the mistake of thinking you can change your beneficiary in your will. The beneficiary of your life insurance policy can only be changed with a change of beneficiary from for your life insurance policy.
The proceeds of life insurance can provide great comfort for a family after losing a loved one. The proceeds can help support a young family after the loss of the “bread winner” by providing lost income and paying off an existing mortgage or other debt. The proceeds can also be used to pay for final medical expenses and funeral arrangements for the deceased. Although the benefits are clear, there may be some quo question whether the end result is worth the current payout. You may wonder if the funds paid for life insurance could be used to do things that can be enjoyed while you are living. The answer is found in how devastated your family would be at your passing, if you had no insurance. Would your family be able to pay off home or auto loans? Would your children still be able to attend the college of their choice? Would your family be able to maintain their current standard of living? Would paying your final expenses be a burden on your loved ones? If you answered “no” to one or more of these questions, you probably need some form of life insurance. If you are at the age where you no longer have young children at home, and you hate little if any debt, you might have old life policies in force that you could either reduce the face amount or eliminate altogether. While life insurance proceeds can always be a blessing, if you are behind in retirement savings and no longer feel the need for the life insurance, you might want to redirect cash from paying life insurance premiums into retirement savings.
If you do not need Life Insurance protection for your entire lifetime, then you do not need a permanent cash value insurance policy. If you just want coverage for a certain period – say 10 years until your children leave home, you would simply need a 10 year level term policy. If you have a 30 year mortgage, then you would need a 30 year level term policy. The least expensive way to purchase life insurance is to lock in the rate (level) for the longest time period you desire coverage.
If you want coverage until the day you die then you will want permanent insurance, as term insurance will be too expensive in your later years. If you are a young couple and cannot afford a permanent cash value policy, instead of purchasing a lesser amount of insurance, purchase the full amount you need in a level term insurance policy.
It would be good to work with a Life Insurance Specialist to help guide you through the process, but it is still very important that you have a basic knowledge of life insurance before making a decision on the protection you need.
If you need guidance then please give us a call. Our Life Insurance Specialist will work with you to determine your need and find a product that suits you.
Choosing a life insurance policy and value can be difficult for the consumer. How do you factor in all the possible final expenses plus what you would want to be left over for your family’s needs. If you have no dependents and no outstanding debts, you may only need a nominal amount. But, if you have a home mortgage, along with some consumer debt and multiple beneficiaries, then acquiring the proper amount of coverage is of utmost importance. So how does one arrive at the magic number that will sustain their family if they pass?
The calculation in determining the needed amount of Life Insurance includes four steps. First determine the amount of money needed to cover immediate bills and your funeral cost. Second, figure the amount needed to pay off your home mortgage, or to have sufficient cash for your beneficiary to pay the monthly mortgage. Third, add the amount of income that would need to be replaced and for how many years. Fourth, you might want to leave some cash for your children’s or grandchildren’s education.
Following the steps above will help you get a general idea of the amount that you need. Working with a Life Insurance Specialist allows you to be sure you have accounted for your future expenses and have not overlooked anything. If you have questions regarding Life Insurance, please give us a call!